There’s no training manual or instruction guide for real estate agents beyond the rules that govern our licensing. We know we need to disclose conflicts of interest, manage client funds and that 43,560 square feet are in an acre.
Even if you’re lucky enough to have a transaction coordinator, you’re the one responsible for project-managing your entire transaction. And this includes working with third-party service providers.
Our most important partners are the settlement services, escrow, title and depending on where you practice, attorneys. We can’t manage a compliant transaction without understanding how these service providers work together behind the scenes.
They’re the safety net for every transaction.
But what do they do? Why are they necessary? How do we talk to clients about them and their fees?
What each partner does
- Title researches the property history, records the new deed with the county and feeds lien information to escrow. They also issue two types of insurance: the lender’s policy, required if your client has a loan, and the owner’s policy, optional but important.
- Escrow is the neutral third party that holds funds and coordinates paperwork, requires written instructions from both parties and the lender to send funds make changes, then at closing pays off liens, disburses to the seller.
- Attorneys are necessary in 10 states — Connecticut, Delaware, Georgia, Massachusetts, New Hampshire, New York, North Carolina, South Carolina, Vermont and West Virginia — where a lawyer must conduct or supervise the closing, while others require attorneys only for tasks like title review or deed prep.
I am positive each and every one of you has heard someone running their mouth about being “in escrow” or “just closed escrow on … ” When I first started, I thought “escrow” was extra money I paid with my mortgage that the bank took out for my taxes and insurance — and that is also an escrow, but not the one I was expecting.
Hope you find this helpful and if you have questions or comments, please reach out.
Question: Who chooses the escrow company? The client or the listing agent?
Answer: This has been an issue for as long as I can remember. Listing agents open pre-escrows with the escrow and title people they like to work with. And in some places, like where I am, it is customary for the buyer to pay for escrow and title policies, so buyer’s agents like to work with their own people. That’s the built-in tug of war.
The best place to find the answer is your local escrow company’s “Who Pays What” page. Title and escrow companies in most states publish these guides because there is no federal law dictating who pays for closing costs.
Everything comes down to regional tradition and what is customary in your location.
A guide that applies in one county can look completely different one county over. In California alone, Northern California buyers usually pay for title, while Southern California sellers do. Florida handles it the same way county by county.
Search “[Your State] Who Pays for What” and you will find downloadable PDFs showing the customary split in your area. That tells you who normally gets to pick the company too, because the side paying the bill usually gets the say. These guides also let you know who pays transfer taxes and other customary fees.
Question: What is a preliminary title report, and what should I be looking for when it comes in?
Answer: A preliminary title report is the title company’s initial written summary of what they found in the public records for the property. There’s another, more in-depth report that comes. It shows who owns the property, the legal description, and every lien, easement, restriction, and encumbrance that will remain on title after closing.
What you should look for when it comes in:
- The vesting. Confirm the seller’s name matches the grant deed and matches the contract.
- Liens. Mortgages, judgments, tax liens, mechanics’ liens — anything that must be paid off at closing.
- Easements. Utility lines, shared driveways and access rights that could affect how you use the property.
- Restrictions. CC&Rs, setback requirements or other use limits.
Anything that looks wrong or unexpected, flag it to your agent and title officer immediately. The preliminary report is your chance to catch problems before they become your problems.
Question: When does the earnest money deposit go into escrow?
Answer: The earnest money deposit goes into escrow based on the purchase agreement, not one universal nationwide rule. Always check the contract because a late deposit can create a default.
In a typical California residential transaction, the earnest money deposit is due within three business days — not calendar days—after acceptance, unless the purchase agreement identifies a different date.
Commercial transactions are more flexible; the contract may require an immediate deposit, within a few business days or other negotiated conditions. The money may be held by escrow, a title company, an attorney or another agreed third party.
Question: Can an escrow officer release funds early, or is that never allowed?
Answer: Escrow officers can release money if everyone agrees to it in writing. The release complies with the escrow instructions and applicable law.
An example would be a buyer releasing a portion of their non-refundable earnest money deposit to the seller as a show of good faith if the buyer is late performing under the contract.
If the funds are disputed, the escrow officer generally must wait for mutual written instructions, a court order or another legally authorized resolution.
Each week in America Answers, Inman contributor America Foy answers questions from the industry at large and offers advice on how to handle the situation.
Have questions? Email America Foy
America Foy is a broker associate at The Grubb Co. Get connected on LinkedIn and Instagram.
